Strengthening accountability in banking: a new regulatory

framework for individuals

Published on 30 July 2014

Background

This joint PRA [Prudential Regulatory Authority] and Financial Conduct Authority (FCA)
consultation paper (CP) sets out proposed changes to the way individuals working for UK
banks, building societies, credit unions and PRA-designated investment firms are
assessed and held accountable for the roles they perform.

The proposals reflect the recommendations of the Parliamentary Commission on Banking

Standards and implement changes required under the Financial Services and Markets Act
2000 (FSMA) as amended by the Financial Services (Banking Reform) Act 2013.

Summary of the proposals covered by the CP

The changes are significant and include:

● a new Senior Managers Regime for individuals who will be subject to regulatory
approval; and
● a Certification Regime which will require relevant firms to assess the fitness and
property of certain employees who could pose a risk of significant harm to the
firm or any of its customers.

The proposals in this consultation are intended to create a new framework to encourage
individuals to take greater responsibility for their actions, and will make it easier for
both firms and regulators to hold individuals to account.

Annexes to CP14/14 include the regulators’ cost benefit analyses, compatibility

statements, draft Handbook text and rules, a draft statement of policy and draft
supervisory statements.

The same CP is available on the FCA’s website with the reference ***CP14/13.

The regulators are seeking views on the implementation timetable for the introduction
of the new regimes and expect to publish this with their final policy statements and any
supporting guidance or supervisory statements around end 2014/early 2015.
Strengthening the alignment of risk and reward: new
remuneration rules

Published on 23 June 2015

Strengthening the alignment of risk and reward: new remuneration

rules - PS12/15
This policy statement includes feedback, final rules, and guidance in relation to
proposals under Consultation Paper 15/14 ‘Strengthening the alignment of risk and
reward: new remuneration rules’ published jointly by the PRA and the Financial Conduct
Authority (FCA).

The changes to the PRA Rulebook and the FCA Handbook apply to banks, building
societies, and PRA-designated investment firms, including UK branches of non-EEA
headquartered firms. These rules apply to all Material Risk Takers (MRTs) at these firms,
including Senior Managers designated under the Senior Managers Regime (SMR) from
2016.

The final provisions on clawback (of paid variable remuneration) and deferral (of unpaid
variable remuneration) will apply to variable remuneration awarded for performance
periods beginning on or after 1 January 2016. The rest of the requirements will apply
from 1 July 2015.

Summary of content

In light of feedback received, some of the proposals in CP15/14 have been revised.
These relate to:

Deferral

The final policy splits the MRT population subject to five-year deferral according to
those responsible for managing risk and all other MRTs. The deferral requirements are
now:

● Seven years for senior managers as defined under the Senior Managers Regime;
● Five years for risk managers as defined under the regulatory technical standard
(RTS) on identification of MRTs; and
● Three to five years as per the Capital Requirements Directive (CRD) minimum for
all other MRTs.
Buyouts

The PRA and FCA will consider further the scope for applying malus (reduction of
unpaid, deferred variable remuneration) to bought-out awards, in line with option three
under our initial consultation.